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Business to Business Marketing

Marketing Business to Business

Picking your First Customer

By Bill & Joann Truby
President and Executive VP; Truby Achievements, Inc.

Your B2B company has just developed a new product and is trying to find its first customer. Should that customer be a large, small or medium size company? While each has its own advantages, the general answer is a medium size company. To understand why, let’s review which of these three groups has influence over your business and pick the one that has the least.

Large companies. These customers could be very attractive. Landing a contract with one of them could provide your business with significant revenue opportunity, increased stability and almost instant credibility. However, while the positives are significant, the negatives may be too.

You may find large firms to be slower in their decision making and contract negotiations. They typically need to involve legal, finance, purchasing and other departments. These guidelines are followed as part of the overall risk mitigation. This “due diligence” is understandable. Large firms have a lot to lose if they make a mistake. Plus they have significant responsibilities to their stakeholders.

As an example of such risk management, large companies may ask you to make your technology or service available for licensing to some other company. The concept of a 'second source' is not uncommon in the high-technology world, particularly in the electronics field. The main reason behind having another company producing almost the same component as you is to ensure that that the customers' production is not disrupted should your company suddenly go out of business.

If this second source process is required, you will find yourself competing with that other supplier. This will likely prevent you from increasing your margins. The beneficiary of such competition, of course, is your customer, who will be ensured of getting a good deal. This may sound unfair or strange, but is too often a necessity in doing business with a large company.

Another potential downside in dealing with large companies is the necessity of discounting your product or service. For large companies going with a particular supplier often creates significant switching costs. To ensure these costs are offset, they will tend to negotiate a discount on the price, or ask for supply exclusivity.

Small companies, on the other hand, make decisions to purchase a product or service much faster. They are often easier to do business with. Most of the time, you will be dealing with the key decision maker who will be able to give you an answer quickly and be willing to negotiate. Small enterprises are generally less risk averse than large ones and will be willing to adopt your product or service faster.

However, the revenue side of the contracts would be the opposite of those you'd see with large companies. In addition, the commitments would tend to be shorter-term and smaller. Lower switching costs make the small enterprises almost too nimble for you.

That leaves us with medium size businesses. These companies are caught in between the two paradigms. They do not quite have the scale and presence in the marketplace, while at the same time they are not as quick and agile. They are desperate to get out of this mid-size stage and grow into large companies as fast as they can.

Statistics show, for example, that companies that get stuck in the mid-size phase end up failing more frequently than small and large companies. These mid-size companies know it themselves and thus will make decisions fairly quickly and be willing to take risks with trying new products and services. They provides you with your best opportunity.

As you grow your business, develop a strategy by analyzing your customer base. These customers may be large, small or medium size enterprises, each with their pros and cons. Pick the first one wisely.

About the authors: Bill Truby has a Masters Degree in Psychology, 30 years of experience in business training & consulting, and has conducted an extensive amount of study in the sciences (particularly physics with an emphasis in quantum physics). Joann Truby, a highly successful leadership and management coach, has worked with Bill for over 12 years. Together, they have published 3 books, professionally recorded over 20 hours of audio training productions and produced multiple video training tools. Bill and Joann have written this article from extensive real-world experience to help leaders and managers be more effective in their roles.